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Nobel Lecture

Nobel Lecture, Oslo, December 10, 2006.

Your Majesties, Your Royal Highnesses, Honorable Members of
the Norwegian Nobel Committee, Excellencies, Ladies and Gentlemen,

Grameen Bank and I are deeply honoured to receive this most prestigious
of awards. We are thrilled and overwhelmed by this honour. Since
the Nobel Peace Prize was announced, I have received endless messages
from around the world, but what moves me most are the calls I get
almost daily, from the borrowers of Grameen Bank in remote Bangladeshi
villages, who just want to say how proud they are to have received
this recognition.

Nine elected representatives of the 7 million borrowers-cum-owners
of Grameen Bank have accompanied me all the way to Oslo to receive
the prize. I express thanks on their behalf to the Norwegian Nobel
Committee for choosing Grameen Bank for this year's Nobel Peace
Prize. By giving their institution the most prestigious prize in
the world, you give them unparalleled honour. Thanks to your prize,
nine proud women from the villages of Bangladesh are at the ceremony
today as Nobel laureates, giving an altogether new meaning to the
Nobel Peace Prize.

All borrowers of Grameen Bank are celebrating this day as the
greatest day of their lives. They are gathering around the nearest
television set in their villages all over Bangladesh , along with
other villagers, to watch the proceedings of this ceremony.

This years' prize gives highest honour and dignity to the hundreds
of millions of women all around the world who struggle every day
to make a living and bring hope for a better life for their children.
This is a historic moment for them.

Poverty is a Threat to Peace

Ladies and Gentlemen:

By giving us this prize, the Norwegian Nobel Committee has given
important support to the proposition that peace is inextricably
linked to poverty. Poverty is a threat to peace.

World's income distribution gives a very telling story. Ninety
four percent of the world income goes to 40 percent of the population
while sixty percent of people live on only 6 per cent of world income.
Half of the world population lives on two dollars a day. Over one
billion people live on less than a dollar a day. This is no formula
for peace.

The new millennium began with a great global dream. World leaders
gathered at the United
Nations in 2000 and adopted, among others,
a historic goal to reduce poverty by half by 2015. Never in human
history had such a bold goal been adopted by the entire world in
one voice, one that specified time and size. But then came September
11 and the Iraq war, and suddenly the world became derailed from
the pursuit of this dream, with the attention of world leaders shifting
from the war on poverty to the war on terrorism. Till now over $
530 billion has been spent on the war in Iraq by the USA alone.

I believe terrorism cannot be won over by military action. Terrorism
must be condemned in the strongest language. We must stand solidly
against it, and find all the means to end it. We must address the
root causes of terrorism to end it for all time to come. I believe
that putting resources into improving the lives of the poor people
is a better strategy than spending it on guns.

Poverty is Denial of All Human Rights

Peace should be understood in a human way − in a broad
social, political and economic way. Peace is threatened by unjust
economic, social and political order, absence of democracy, environmental
degradation and absence of human rights.

Poverty is the absence of all human rights. The frustrations,
hostility and anger generated by abject poverty cannot sustain peace
in any society. For building stable peace we must find ways to provide
opportunities for people to live decent lives.

The creation of opportunities for the majority of people − the
poor − is at the heart of the work that we have dedicated
ourselves to during the past 30 years.

Grameen Bank

I became involved in the poverty issue not as a policymaker
or a researcher. I became involved because poverty was all around
me, and I could not turn away from it. In 1974, I found it difficult
to teach elegant theories of economics in the university classroom,
in the backdrop of a terrible famine in Bangladesh. Suddenly, I
felt the emptiness of those theories in the face of crushing hunger
and poverty. I wanted to do something immediate to help people around
me, even if it was just one human being, to get through another
day with a little more ease. That brought me face to face with poor
people's struggle to find the tiniest amounts of money to support
their efforts to eke out a living. I was shocked to discover a woman
in the village, borrowing less than a dollar from the money-lender,
on the condition that he would have the exclusive right to buy all
she produces at the price he decides. This, to me, was a way of
recruiting slave labor.

I decided to make a list of the victims of this money-lending "business" in
the village next door to our campus.

When my list was done, it had the names of 42 victims who borrowed
a total amount of US $27. I offered US $27 from my own pocket
to get these victims out of the clutches of those money-lenders.
The excitement that was created among the people by this small action
got me further involved in it. If I could make so many people so
happy with such a tiny amount of money, why not do more of it?

That is what I have been trying to do ever since. The first thing
I did was to try to persuade the bank located in the campus to lend
money to the poor. But that did not work. The bank said that the
poor were not creditworthy. After all my efforts, over several months,
failed I offered to become a guarantor for the loans to the poor.
I was stunned by the result. The poor paid back their loans, on
time, every time! But still I kept confronting difficulties in expanding
the program through the existing banks. That was when I decided
to create a separate bank for the poor, and in 1983, I finally succeeded
in doing that. I named it Grameen Bank or Village bank.

Today, Grameen Bank gives loans to nearly 7.0 million poor people,
97 per cent of whom are women, in 73,000 villages in Bangladesh.
Grameen Bank gives collateral-free income generating, housing, student
and micro-enterprise loans to the poor families and offers a host
of attractive savings, pension funds and insurance products for
its members. Since it introduced them in 1984, housing loans have
been used to construct 640,000 houses. The legal ownership of these
houses belongs to the women themselves. We focused on women because
we found giving loans to women always brought more benefits to the
family.

In a cumulative way the bank has given out loans totaling about
US $6.0 billion. The repayment rate is 99%. Grameen Bank routinely
makes profit. Financially, it is self-reliant and has not taken
donor money since 1995. Deposits and own resources of Grameen Bank
today amount to 143 per cent of all outstanding loans. According
to Grameen Bank's internal survey, 58 per cent of our borrowers
have crossed the poverty line.

Grameen Bank was born as a tiny homegrown project run with the
help of several of my students, all local girls and boys. Three
of these students are still with me in Grameen Bank, after all these
years, as its topmost executives. They are here today to receive
this honour you give us.

This idea, which began in Jobra, a small village in Bangladesh,
has spread around the world and there are now Grameen type programs
in almost every country.

Second Generation

It is 30 years now since we began. We keep looking at the children
of our borrowers to see what has been the impact of our work on
their lives. The women who are our borrowers always gave topmost
priority to the children. One of the Sixteen Decisions developed
and followed by them was to send children to school. Grameen Bank
encouraged them, and before long all the children were going to
school. Many of these children made it to the top of their class.
We wanted to celebrate that, so we introduced scholarships for talented
students. Grameen Bank now gives 30,000 scholarships every year.

Many of the children went on to higher education to become doctors,
engineers, college teachers and other professionals. We introduced
student loans to make it easy for Grameen students to complete higher
education. Now some of them have PhD's. There are 13,000 students
on student loans. Over 7,000 students are now added to this number
annually.

We are creating a completely new generation that will be well
equipped to take their families way out of the reach of poverty.
We want to make a break in the historical continuation of poverty.

Beggars Can Turn to Business

In Bangladesh 80 percent of the poor families have already been
reached with microcredit. We are hoping that by 2010, 100 per cent
of the poor families will be reached.

Three years ago we started an exclusive programme focusing on
the beggars. None of Grameen Bank's rules apply to them. Loans
are interest-free; they can pay whatever amount they wish, whenever
they wish. We gave them the idea to carry small merchandise such
as snacks, toys or household items, when they went from house to
house for begging. The idea worked. There are now 85,000 beggars
in the program. About 5,000 of them have already stopped begging
completely. Typical loan to a beggar is $12.

We encourage and support every conceivable intervention to help
the poor fight out of poverty. We always advocate microcredit in
addition to all other interventions, arguing that microcredit makes
those interventions work better.

Information Technology for the Poor

Information and communication technology (ICT) is quickly changing
the world, creating distanceless, borderless world of instantaneous
communications. Increasingly, it is becoming less and less costly.
I saw an opportunity for the poor people to change their lives if
this technology could be brought to them to meet their needs.

As a first step to bring ICT to the poor we created a mobile phone
company, Grameen Phone. We gave loans from Grameen Bank to the poor
women to buy mobile phones to sell phone services in the villages.
We saw the synergy between microcredit and ICT.

The phone business was a success and became a coveted enterprise
for Grameen borrowers. Telephone-ladies quickly learned and innovated
the ropes of the telephone business, and it has become the quickest
way to get out of poverty and to earn social respectability. Today
there are nearly 300,000 telephone ladies providing telephone service
in all the villages of Bangladesh . Grameen Phone has more than
10 million subscribers, and is the largest mobile phone company
in the country. Although the number of telephone-ladies is only
a small fraction of the total number of subscribers, they generate
19 per cent of the revenue of the company. Out of the nine board
members who are attending this grand ceremony today 4 are telephone-ladies.

Grameen Phone is a joint-venture company owned by Telenor of Norway
and Grameen Telecom of Bangladesh. Telenor owns 62 per cent share
of the company, Grameen Telecom owns 38 per cent. Our vision was
to ultimately convert this company into a social business by giving
majority ownership to the poor women of Grameen Bank. We are working
towards that goal. Someday Grameen Phone will become another example
of a big enterprise owned by the poor.

Free Market Economy

Capitalism centers on the free market. It is claimed that the
freer the market, the better is the result of capitalism in solving
the questions of what, how, and for whom. It is also claimed that
the individual search for personal gains brings collective optimal
result.

I am in favor of strengthening the freedom of the market. At the
same time, I am very unhappy about the conceptual restrictions imposed
on the players in the market. This originates from the assumption
that entrepreneurs are one-dimensional human beings, who are dedicated
to one mission in their business lives − to maximize profit.
This interpretation of capitalism insulates the entrepreneurs from
all political, emotional, social, spiritual, environmental dimensions
of their lives. This was done perhaps as a reasonable simplification,
but it stripped away the very essentials of human life.

Human beings are a wonderful creation embodied with limitless
human qualities and capabilities. Our theoretical constructs should
make room for the blossoming of those qualities, not assume them
away.

Many of the world's problems exist because of this restriction
on the players of free-market. The world has not resolved the problem
of crushing poverty that half of its population suffers. Healthcare
remains out of the reach of the majority of the world population.
The country with the richest and freest market fails to provide
healthcare for one-fifth of its population.

We have remained so impressed by the success of the free-market
that we never dared to express any doubt about our basic assumption.
To make it worse, we worked extra hard to transform ourselves, as
closely as possible, into the one-dimensional human beings as conceptualized
in the theory, to allow smooth functioning of free market mechanism.

By defining "entrepreneur" in a broader way we can change
the character of capitalism radically, and solve many of the unresolved
social and economic problems within the scope of the free market.
Let us suppose an entrepreneur, instead of having a single source
of motivation (such as, maximizing profit), now has two sources
of motivation, which are mutually exclusive, but equally compelling
− a) maximization of profit and b) doing good to people and the
world.

Each type of motivation will lead to a separate kind of business.
Let us call the first type of business a profit-maximizing business,
and the second type of business as social business.

Social business will be a new kind of business introduced in the
market place with the objective of making a difference in the world.
Investors in the social business could get back their investment,
but will not take any dividend from the company. Profit would be
ploughed back into the company to expand its outreach and improve
the quality of its product or service. A social business will be
a non-loss, non-dividend company.

Once social business is recognized in law, many existing companies
will come forward to create social businesses in addition to their
foundation activities. Many activists from the non-profit sector
will also find this an attractive option. Unlike the non-profit
sector where one needs to collect donations to keep activities going,
a social business will be self-sustaining and create surplus for
expansion since it is a non-loss enterprise. Social business will
go into a new type of capital market of its own, to raise capital.

Young people all around the world, particularly in rich countries,
will find the concept of social business very appealing since it
will give them a challenge to make a difference by using their creative
talent. Many young people today feel frustrated because they cannot
see any worthy challenge, which excites them, within the present
capitalist world. Socialism gave them a dream to fight for. Young
people dream about creating a perfect world of their own.

Almost all social and economic problems of the world will be addressed
through social businesses. The challenge is to innovate business
models and apply them to produce desired social results cost-effectively
and efficiently. Healthcare for the poor, financial services for
the poor, information technology for the poor, education and training
for the poor, marketing for the poor, renewable energy − these are
all exciting areas for social businesses.

Social business is important because it addresses very vital concerns
of mankind. It can change the lives of the bottom 60 per cent of
world population and help them to get out of poverty.

Grameen's Social Business

Even profit maximizing companies can be designed as social businesses
by giving full or majority ownership to the poor. This constitutes
a second type of social business. Grameen Bank falls under this
category of social business.

The poor could get the shares of these companies as gifts by donors,
or they could buy the shares with their own money. The borrowers
with their own money buy Grameen Bank shares, which cannot be transferred
to non-borrowers. A committed professional team does the day-to-day
running of the bank.

Bilateral and multi-lateral donors could easily create this type
of social business. When a donor gives a loan or a grant to build
a bridge in the recipient country, it could create a "bridge
company" owned by the local poor. A committed management company
could be given the responsibility of running the company. Profit
of the company will go to the local poor as dividend, and towards
building more bridges. Many infrastructure projects, like roads,
highways, airports, seaports, utility companies could all be built
in this manner.

Grameen has created two social businesses of the first type. One
is a yogurt factory, to produce fortified yogurt to bring nutrition
to malnourished children, in a joint venture with Danone. It will
continue to expand until all malnourished children of Bangladesh
are reached with this yogurt. Another is a chain of eye-care hospitals.
Each hospital will undertake 10,000 cataract surgeries per year
at differentiated prices to the rich and the poor.

Social Stock Market

To connect investors with social businesses, we need to create
social stock market where only the shares of social businesses will
be traded. An investor will come to this stock-exchange with a clear
intention of finding a social business, which has a mission of his
liking. Anyone who wants to make money will go to the existing stock-market.

To enable a social stock-exchange to perform properly, we will
need to create rating agencies, standardization of terminology,
definitions, impact measurement tools, reporting formats, and new
financial publications, such as, The Social Wall Street Journal.
Business schools will offer courses and business management degrees
on social businesses to train young managers how to manage social
business enterprises in the most efficient manner, and, most of
all, to inspire them to become social business entrepreneurs themselves.

Role of Social Businesses in Globalization

I support globalization and believe it can bring more benefits to the
poor than its alternative. But it must be the right kind of globalization.
To me, globalization is like a hundred-lane highway criss-crossing
the world. If it is a free-for-all highway, its lanes will be taken
over by the giant trucks from powerful economies. Bangladeshi rickshaw
will be thrown off the highway. In order to have a win-win globalization
we must have traffic rules, traffic police, and traffic authority
for this global highway. Rule of "strongest
takes it all" must be replaced by rules that ensure that the
poorest have a place and piece of the action, without being elbowed
out by the strong. Globalization must not become financial imperialism.

Powerful multi-national social businesses can be created to retain
the benefit of globalization for the poor people and poor countries.
Social businesses will either bring ownership to the poor people,
or keep the profit within the poor countries, since taking dividends
will not be their objective. Direct foreign investment by foreign
social businesses will be exciting news for recipient countries.
Building strong economies in the poor countries by protecting their
national interest from plundering companies will be a major area
of interest for the social businesses.

We Create What We Want

We get what we want, or what we don't refuse. We accept
the fact that we will always have poor people around us, and that
poverty is part of human destiny. This is precisely why we continue
to have poor people around us. If we firmly believe that poverty
is unacceptable to us, and that it should not belong to a civilized
society, we would have built appropriate institutions and policies
to create a poverty-free world.

We wanted to go to the moon, so we went there. We achieve what
we want to achieve. If we are not achieving something, it is because
we have not put our minds to it. We create what we want.

What we want and how we get to it depends on our mindsets. It
is extremely difficult to change mindsets once they are formed.
We create the world in accordance with our mindset. We need to invent
ways to change our perspective continually and reconfigure our mindset
quickly as new knowledge emerges. We can reconfigure our world if
we can reconfigure our mindset.

We Can Put Poverty in the Museums

I believe that we can create a poverty-free world because poverty
is not created by poor people. It has been created and sustained
by the economic and social system that we have designed for ourselves;
the institutions and concepts that make up that system; the policies
that we pursue.

Poverty is created because we built our theoretical framework
on assumptions which under-estimates human capacity, by designing
concepts, which are too narrow (such as concept of business, credit-
worthiness, entrepreneurship, employment) or developing institutions,
which remain half-done (such as financial institutions, where poor
are left out). Poverty is caused by the failure at the conceptual
level, rather than any lack of capability on the part of people.

I firmly believe that we can create a poverty-free world if we
collectively believe in it. In a poverty-free world, the only place
you would be able to see poverty is in the poverty museums. When
school children take a tour of the poverty museums, they would be
horrified to see the misery and indignity that some human beings
had to go through. They would blame their forefathers for tolerating
this inhuman condition, which existed for so long, for so many people.

A human being is born into this world fully equipped not only
to take care of him or herself, but also to contribute to enlarging
the well being of the world as a whole. Some get the chance to explore
their potential to some degree, but many others never get any opportunity,
during their lifetime, to unwrap the wonderful gift they were born
with. They die unexplored and the world remains deprived of their
creativity, and their contribution.

Grameen has given me an unshakeable faith in the creativity of
human beings. This has led me to believe that human beings are not
born to suffer the misery of hunger and poverty.

To me poor people are like bonsai trees. When you plant the best
seed of the tallest tree in a flower-pot, you get a replica of the
tallest tree, only inches tall. There is nothing wrong with the
seed you planted, only the soil-base that is too inadequate. Poor
people are bonsai people. There is nothing wrong in their seeds.
Simply, society never gave them the base to grow on. All it needs
to get the poor people out of poverty for us to create an enabling
environment for them. Once the poor can unleash their energy and
creativity, poverty will disappear very quickly.

Let us join hands to give every human being a fair chance to unleash
their energy and creativity.

Ladies and Gentlemen,

Let me conclude by expressing my deep gratitude to the Norwegian
Nobel Committee for recognizing that poor people, and especially
poor women, have both the potential and the right to live a decent
life, and that microcredit helps to unleash that potential.

I believe this honor that you give us will inspire many more bold
initiatives around the world to make a historical breakthrough in
ending global poverty.